2 Mar 2017

How free trade won Trump the White House

Onno writes*

Now that Trump has passed executive orders on his most controversial campaign promises, we can no longer cling to the idea that his time in office will not turn out to be a disaster for the United States. With elections coming up in many Europeans countries, and right-wing parties leading the polls in most, it is of vital importance that we understand how Trump won, and how we can prevent similar populists from winning on this side of the ocean.

By now it is obvious that Trump secured his victory in the traditionally Democratic Rust Belt states. The analysis that they voted for him because of cultural reasons seems to fall short simply because these states are traditionally Democratic. Rather, we should look for an explanation in socioeconomic factors.

Hillary Clinton is a staunch supporter of free trade, and one could argue, rightfully so. The benefits of free trade are not denied by many, so it’s easy to dismiss those who do as crazy. However, this would be making a mistake. Yes, aggregately speaking free trade is economically beneficial. However, in the game of free trade, there are inevitable losers. This is important to realize when defending free trade; when the losers are not compensated, they will hate the game. In other words, if redistribution of wealth is not occurring, backlash is almost guaranteed to happen; those who do not get the profits of free trade but do feel the losses will pull the political brakes. This is exactly what happened in the Rust Belt states: they were losing the free trade game, were not compensated, and pulled the political brakes by voting for Trump.

Of course, redistributing income is incredibly difficult, especially in a country in which special interests largely dictate the political process. Income, once distributed, becomes ownership, and ownership means vested interests that are defended. But the Democratic party should at least have acknowledged the losers of free trade, instead of repeating that free trade is economically beneficial on an aggregate level.

What is true for free trade, is equally true for automatization. Again, we benefit aggregately. Again, there are many losers. And again, if those put out of a job are not be compensated in some way or another, they are likely to pull the political breaks. We can only hope that those who own the means of production have enough foresight to allow for redistribution before this happens.

Not only do we need a new vision for those put out of a job, – perhaps providing a basic income – we need to fundamentally rethink the way that we approach the economy, and in extent protest votes. We cannot simply look at the bottom line, because the disenfranchised will pull the political breaks before we ever reach our desired goals. Rather, we should compensate those who are losing, even if that means giving up some aggregate benefits.

Bottom Line Free trade and automatization might benefit the bottom line of the United States, they do not benefit all individuals. We should push for redistribution if we want to prevent an European Trump.
* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

1 comment:

Aussie Mary said...

Excellent piece and this was evident in the past few years, with the inequality of wealth growing in many countries, especially the US. Progress is about everyone progressing and sharing the benefits is about social inclusion. Very well said and nicley written.

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